How do I record a charge-off in QuickBooks for an invoice I cannot collect?
How to record a charge-off in QuickBooks
Short answer
Create a Bad Debts expense account, add a Bad Debt service item linked to it, then issue a credit memo to the customer using that item for the unpaid amount, and apply the credit memo against the open invoice. That clears the receivable and books the loss to expense. If you are on accrual GAAP with a meaningful AR book, the allowance method is more correct than this direct write-off, and your preparer can advise on which fits your books.
"Charge-off" is borrowed from banking, where it has a specific regulatory meaning: a creditor moves a delinquent receivable off the active portfolio after a defined aging threshold (commonly 180 days for credit cards). In small-business accounting the same act is usually called a bad-debt write-off, and the bookkeeping is identical. QuickBooks does not have a button labeled "charge off" — you do it through a credit memo against the invoice, or through a journal entry against the receivable.
The credit-memo path is the QuickBooks Online default and the easier of the two. First, create an expense account named Bad Debts (Detail Type: Bad debts). Add a service-type product item also named Bad Debt and point its Income account at that expense account. Open the customer's overdue invoice, click the New button, choose Credit memo, set the Product/Service to Bad Debt, enter the unpaid amount, and save. Then open Receive Payment for the same customer with $0 in the amount field and apply the credit memo to the open invoice. The receivable closes and the loss lands in Bad Debts expense.
Under accrual GAAP with a material receivable book, the allowance method is the correct treatment. You estimate uncollectible AR each period (often a percentage of aged categories), debit Bad Debt Expense and credit Allowance for Doubtful Accounts. When a specific invoice is later written off, the entry is a credit to Accounts Receivable and a debit to Allowance — no expense hits at write-off, because you already booked it via the estimate. Most small service businesses use direct write-off for simplicity; whether your books should use allowance is a question for your accountant, not a QuickBooks UI decision.
Tax timing matters and trips up a lot of owners. On cash-basis books you generally cannot deduct a write-off, because you never recognized the income in the first place. On accrual-basis books the loss is deductible in the year written off, if the receivable is genuinely uncollectible — meaning you have made reasonable efforts to collect and have evidence of inability or unwillingness to pay. Document the calls, the emails, and any dispute history; the IRS occasionally asks for it on audit, and a clean log of attempts is worth keeping.
A clean charge-off is usually the right move once an invoice is past 180 days and three first-party call attempts have failed. Syntharra logs every call attempt against the invoice in the integration's metadata, which is what your accountant will want when documenting reasonable efforts. The accounting decision still belongs to you and your preparer — we just supply the evidence trail.